Embattled shareholders of engineering group Jarvis will be left with 4.75 per cent of the company following a debt-for-equity restructuring, it emerged yesterday.

The proposed financial rescue plan, which is needed to tackle debts of more than £300m, was announced alongside confirmation that Deutsche Bank will offer loans totalling £31.4m to meet short-term trading needs.

The extent of the dilutive impact on shareholdings will not come as a surprise to investors as the company warned last week it was considering a debt-for-equity swap that would leave them with ownership of five per cent or less.

Jarvis has been battling for survival after over-stretching itself on contracts, particularly in the area of private finance initiatives.

The debt-for-equity restructuring, which Jarvis hopes to complete by the end of August, will be followed by a £50m share placing so the recapitalised company can pay back its loan to Deutsche Bank.

It warned alternative measures were being explored in the event shareholders rejected the swap, including a proposal providing no shareholder value.

Jarvis also updated the City on trading, which it said continued to be challenging with turnover for rail and plant business below the level achieved in the first half of the financial year.